* Euro/yen pulls away from previous day's 18-month high
* Yen takes breather after recent slide
* Dollar/yen pauses after hitting 29-month peak
By Masayuki Kitano
SINGAPORE, Jan 3 The yen edged higher on
Thursday but remained near a 29-month low versus the dollar and
looked fragile, weighed by expectations of more forceful
monetary stimulus by the Bank of Japan.
The dollar slipped 0.1 percent to 87.26 yen. The
dollar rose to as high as 87.36 yen earlier on Thursday on
trading platform EBS, the greenback's highest level against the
Japanese currency since late July 2010.
"Technically dollar/yen looks somewhat overbought here. It's
gone a long way in a very short time," said Callum Henderson,
global head of FX research for Standard Chartered Bank in
Singapore, adding that the dollar could see some consolidation
in the near term before heading higher.
"Over the next few months, I think the bias is still for a
higher dollar/yen rate," he said.
The yen also clawed higher on the crosses. The Australian
dollar dipped 0.1 percent to 91.47 yen. The Aussie
dollar had climbed to 91.77 yen on Wednesday, its strongest
level against the yen since September 2008, according to Reuters
The euro fell 0.5 percent to 114.66 yen, pulling
away from an 18-month high of 115.995 yen set on trading
platform EBS on Wednesday.
Against the dollar, the euro slipped 0.3 percent to $1.3139
, with one trader saying that stop-loss selling helped add
to the euro's decline on Thursday.
The yen had tumbled on Wednesday after U.S. lawmakers passed
a bill on Tuesday to avoid the "fiscal cliff", bolstering
investors' appetite for risky assets.
Over the past several weeks, the yen has also weakened on
expectations that a new Japanese government led by Prime
Minister Shinzo Abe would push the Bank of Japan into more
forceful monetary easing to beat deflation.
Abe has called on the BOJ to set a 2 percent inflation
target, double the central bank's current goal. Abe has also
said that he will pick someone who agrees with his views on the
need for bolder monetary easing to succeed BOJ Governor Masaaki
Shirakawa when the governor's term expires in April.
With a number of potentially yen-bearish events coming up
over the next few months, including the BOJ's policy meeting on
Jan. 21-22 and the forthcoming change in BOJ leadership, the
dollar seems likely to head higher versus the yen, said a trader
for a Japanese bank in Bangkok.
To be sure, since the dollar's recent rise against the yen
has been surprisingly fast, there is also a risk that the speed
of any pull-back in the dollar could be rapid, the trader said.
"But that is basically a risk scenario, and while the dollar
could see a dip of one yen or so, I think it will probably
overcome such declines and keep heading higher," he said.
The dollar climbed 12.8 percent against the yen in 2012 for
its biggest yearly percentage rise since 2005.
The bulk of those gains came late in 2012, and the dollar is
now up more than 10 percent against the yen compared to a trough
hit in early November.